Some people have the goal of wrapping up their careers with a $1 million nest egg. Others may be content to enter retirement with a few hundred thousand dollars in savings.
The amount of money you'll need for a comfortable retirement will hinge largely on your expenses and goals. After all, a modest lifestyle that involves staying close to home is apt to cost less than one centering on global travel.
But for the most part, you should expect to need some amount of money in your nest egg to manage your living costs once your career comes to a close. Yet a recent NFCC and Wells Fargo survey found that while 63% of workers are confident they're saving enough for retirement, more than 20% are saving no money at all each year. And if you're part of that statistic, it's best to start making changes as soon as possible.
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Social Security won't do enough
Some people neglect their retirement savings not intentionally, but out of necessity. And these days, with living costs soaring due to inflation, it's easy to see why 401(k) or IRA contributions might fall by the wayside.
But if you don't make an effort to sock some amount of money away for retirement, you could end up in a serious lurch later in life. That's because Social Security will only replace about 40% of your pre-retirement income if you're an average earner. Most seniors, however, need about twice that much income to maintain a decent lifestyle.
Furthermore, Social Security is facing the possibility of benefit cuts in the not-so-distant future. The program's trust funds are expected to run dry in 2035, and from there, reduced benefits could ensue if lawmakers don't arrive at a solution to pump more money into the program.
As such, it's really important to build a nest egg for retirement, even if it's a modest one. If you're behind on savings, that may require you to make some sacrifices, whether it's skipping vacations, downsizing your living space, or taking on a side job to boost your income and make 401(k) or IRA contributions possible.
In fact, let's say you're only able to carve out $200 a month for retirement savings purposes, but you save that money consistently over the next 30 years. If you invest your 401(k) or IRA at an average annual 8% return, which is a bit below the stock market's average, you'll end up with a nest egg worth about $272,000.
But if you don't bring any personal savings with you into retirement, you may end up struggling immensely. Today, Social Security only pays the average senior $1,657 a month. If that doesn't sound like a lot of money to live on, imagine how you might feel if benefits are slashed by about 20%, which is a real possibility at this point. But if you make an effort to build a nest egg, you might manage to spare yourself a world of financial stress in retirement -- and enjoy your senior years to the fullest.
